German IFO preview: what to expect of EUR/USD?

FXStreet (Mumbai) - The EUR/USD pair is trading below the critical support at 1.0890 (38.2% of 1.1495-1.0517) after the Fed came out with a 25bps hike along with a signal of 4 rate hikes next year. The immediate focus is now on the German IFO preview figure.

Weak IFO will add to bearish move

The EUR and other major are suffering from a bearish hangover from the hawkish Fed decision. Markets were expecting the Fed to indicate a very slow pace of tightening, but the Dot Chart indicated the Fed is to raise 4 rates next year.

Consequently, an uptick in the German IFO sentiment indices is unlikely to provide a significant relief to the EUR. However, a weaker-than-expected IFO reading may add to the bearish pressure on the EUR/USD pair.

The German IFO business confidence index is expected to remain unchanged at 109 in December. The Current Assessment index is expected to remain unchanged at 113.4, while the Expectations index is seen rising to 105 from 104.7 levels.

EUR/USD Technical Levels

At 1.0860, the pair is likely to find support at 1.0796 (Dec 7 low). A break lower would expose 1.0748 (23.6% of 1.1495-1.0517), under which the pair could drop to 1.0689 (Nov 25 high). On the other hand, resistance is seen at 1.0890 (38.2% of 1.1495-1.0517), above which the pair could test 1.0922 (50-DMA)-1.0940 (61.8% of Mar-Aug rally). A break higher would bring 1.1006 (50% of 1.1495-1.0517) into play.

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